Responsive Fundraising: The donor-centric framework helping today's leading nonprofits grow giving

INTRODUCTION

WHY I WROTE THIS BOOK

We make a living by what we get, but we make a life by what we give.

– Winston Churchill

As humans, we are wired to serve and love each other. In fact, I believe generosity is one of the greatest forces in our culture. When someone chooses to give their time, talent or money, they make a decision to set aside their own interests and prioritize the needs of their neighbor. And there is no greater example of that than the act of selfless generosity. Those who receive the gift are changed, but the giver also feels an internal shift.

I have five kids, from seventeen down to five years old. One of the first things I learned as a parent was how truly selfish I was. It took about six months as a new dad for me to realize my children would not care how much sleep I got, or if I was caught up on my favorite TV series. They required my undivided love and attention. And, because I love them, I was generous with both.

Don’t get me wrong. I certainly haven’t been a perfect dad. But over time I have learned to set aside my own interests for the interests of my kids and I have seen myself change in tremendous ways because of these daily sacrifices.

This is where generosity starts for many of us — in the seemingly automatic act of giving to those in our daily life. We were given an unearned gift by a parent, or a friend, or a coach, or a teacher. We experienced the power of generosity and then we reciprocated that generosity with those closest to us. Generosity begets generosity.

As we grow, we can’t help but notice the needs of those outside of our immediate circle and our generosity spreads to our local community and then to our global network. We are drawn to opportunities to give back; to be part of something bigger than ourselves.

When I decided to start my company, Virtuous, my driving motivation was to help increase generosity worldwide. After fifteen years working for and with nonprofits, I understood that generosity had the power to create amazing good in the world while re-shaping the heart of the giver, compounding what’s possible in philanthropy. When generosity grows, we are all elevated. I recognized the transformative power of giving and I wanted to find a way to give back to those organizations that had given so much to me.

Nonprofits serve a critical role in society. They provide givers with opportunities to do good at a scale that would be impossible on their own. My experience of working in the trenches with nonprofits was rewarding and fulfilling. But, nonprofit work can also be incredibly challenging. No matter what nonprofit I worked with, the same obstacles kept blocking our progress. At the heart of the problem are two pervasive beliefs among nonprofits. First, nonprofits tend to be risk-averse. That is, they believe that the safe choice is always better than a bold, strategic change. And the second belief was that fundraising is a necessary evil in the nonprofit world. Donors are nothing but a means to an end. While our for-profit counterparts evolved under market pressures and desperately worked to serve their customers, most nonprofits were trapped by an institutional inertia that pushed back on innovation and diminished the value of the donors they worked so hard to find.

I watched as fundraisers sent thousands of traditional direct mail pieces that resulted in dropping response rates, which fell faster every year. Month after month, despite every indication that they should be doing things differently, they still chose to use the same tactics with the same donors. It worked in the past, why wouldn’t it work now? These were smart people who were committed to doing incredible work, but when it came to fundraising, they were trapped by a legacy model that inhibited their ability to do more good in the world.

What’s worse, this traditional model prevented nonprofits from serving the donors whose lives and passions were deeply connected to the cause. Most donors loved our work, but felt alienated by the impersonal — and often desperate — communication they received from our nonprofit.

At Virtuous, we help reimagine fundraising for nonprofits. We believe that many of the traditional approaches to fundraising were designed for a world that no longer exists. Today’s donors expect (and deserve) an authentic connection to the cause. But many nonprofits are failing to deliver.

We’ve seen nonprofits who are thoughtful and generous with their donors inspire a lifetime of sacrificial generosity. They embody the principles of what we call, responsive fundraising. In The Responsive Framework, nonprofits aren’t focused solely on their cause; they are also focused on forming the heart of their donors. When done well, responsive fundraising can multiply a nonprofit’s impact. Donors become loyal megaphones for the cause, and nonprofits create a true movement that is able to do far more good.

I know that we’ll never be able serve every nonprofit through Virtuous. But the principles that we encourage and the strategies we facilitate have the ability to transform fundraising at any organization. That’s where the idea for this book was born.

This book aims to define responsive fundraising and establish a framework to help nonprofits inspire meaningful donor relationships and increased generosity. No matter what tools you use or insights you uncover about your donors, The Responsive Framework gives you the foundation you need to connect with today’s donor and prime you to adapt to the needs of donors in the future.

The Responsive Framework we have created is simple enough that any organization can easily implement it, yet has tremendous implications for how nonprofits can maximize their impact.

The Responsive Framework can help free your nonprofit from the confines of legacy fundraising tactics and push you towards agile, adaptive strategies that are required for connecting with the modern donor.

The responsive approach to fundraising provides the personal connection and impactful relationships donors desire. The result is predictable, sustainable generosity at a reduced cost to the nonprofit.

Use this book to understand the philosophies behind the responsive fundraising, to see examples of how it is happening in the industry and to carve a path for doing the same in your own organization.

The first section of the book lays out the generosity crisis facing today’s nonprofits and the changing expectations of today’s donors. The next section walks you through The Responsive Framework and provides practical help for treating all of your donors like major donors. Finally, we’ll finish with some practical case studies and tactics to help you imagine how responsive might apply at your organization.

Throughout the book, you’ll notice boxes we’ve titled Responsive Plays. These are the practical ways your nonprofit can start integrating responsive fundraising strategies right now. Many of the Plays require technology and practices that might be new to your organization. I’ve attempted to explain these new practices as thoroughly as possible, but fully embracing these tactics will require hard work and research. Trust me, the hard work will be worth it. The Responsive Plays and practices shared in this book can be used as a foundation transforming your nonprofit into a responsive organization. But to ensure they resonate with your specific donors, use your creativity to optimize or adapt them in a way your donors will love.

My hope is that in these pages you’ll find the information you need to do the work you’re meant to do. Your donors deserve it. Your beneficiaries need it. Here’s to your success.

GABE COOPER, 2020

CHAPTER 1:

THE GENEROSITY CRISIS

No one can see a bubble That’s what makes it a bubble.

– The Big Short

You may not know John Antioco by name, but there’s a good chance you’re familiar with his biggest mistake. In early 2000, Antioco took a meeting with a couple of business owners named Reed Hastings and Marc Randolph. The pair were unknowns at the time, but they were hoping to convince Antioco to buy their business for $50 million. Some familiar with the meeting, and the proposal, remember Antioco practically laughing Hasting and Randolph out of the room.¹

At the time, Antioco couldn’t see any upside to buying the struggling start-up. He was in charge of a huge corporation that was a staple of American culture. Hastings and Randolph’s small business, on the other hand, was far from financially successful. Without any real incentive, Antioco passed. Unfortunately, by 2010, Antioco’s company had declared bankruptcy and Hastings and Randolph found themselves running a multi-billion dollar company.

For those who haven’t Googled it yet, Antioco is the former CEO of Blockbuster, and Hastings and Randolph are the co-founders of Netflix.

Media companies love this story, especially in the tech space. It solidifies the lore of visionaries and encourages people to keep pushing, even if no one else appreciates their ideas. For me, the more important lesson in this story is about Antioco. At the time, his decision to pass on Netflix wasn’t negligent. Netflix only offered a mail-order DVD service — and more importantly, they were losing money. Antioco already had a partnership lined up with DirecTV that was projected to be an early version of on-demand movie streaming. On paper, his decision looks relatively sound.

But, of course, business decisions involve more than simply what’s on paper. In hindsight, we all know that Antioco made a mistake. But his mistake wasn’t turning down the early version of Netflix. His biggest mistake had nothing to do with Netflix. Antioco failed Blockbuster when he missed the changes in customer behaviors. The moment he ignored signs that the future would be different than the past, he created a problem that his company would never recover from.

Today, anyone can see that paying $50 million for Netflix was a steal. The new normal of a personalized, on-demand movie selection viewable from any device makes Blockbuster’s brick and mortar model of video rental seem ludacris. But noticing the bubble after it bursts isn’t helpful. To succeed in an ever-changing culture of technology and human behavior, you’ve got to be able to see the bubble while it’s forming.

THE UNSEEN NONPROFIT BUBBLE

John Antioco’s story isn’t simply a humorous example of one man turning down a billion-dollar idea. Rather, it serves as a cautionary tale for other industries facing innovation. I lead with his mistake because I don’t want to stand by and watch the same thing happen to nonprofits.

Right now, nonprofits are living in a bubble that’s primed to pop, and only a few people seem to be paying attention.

On the outside, giving in the United States looks healthier than ever before. From 2006 to 2015, donations in the United States increased from $281 billion to $373 billion.² That’s almost $10 billion in new generosity added every year. But, if you look a little closer at the numbers, you’ll see they tell a different story — one that puts a lot of nonprofits at risk. Over the same period, the number of individual donors dropped by 18 percent. Just under one-fifth of individual donors disappeared. And a deeper dive into the data shows that nonprofits have lost a full 25 percent of their mid- and low-tier donors over the past decade.

We also know that from 2003 to 2013, itemized charitable deductions decreased by 34 percent among those making less than $100,000. This trend continues. In 2018, overall giving increased by 1.5 percent, but donor retention, new donor numbers, repeat donor retention, reactivation rates, and gifts under $1,000? All down.³

Nicholas Ellinger perfectly summarizes the issue in his book, The New Nonprofit, saying, If our new donor numbers are down, our overall retention is down, our retention of new donors, specifically, is down, and our recapture rates are down, where are the major donors of the future going to come from?

It’s hard to overstate the implications of that kind of loss. In the last decade, the bottom has dropped out of American generosity, but no one is talking about it. One reason for the silence is the fact that many nonprofits haven’t yet felt the pain. Giving from major donors has covered the deficit. Large gifts account for most of the overall revenue growth over the last ten years. This trend is typical in seasons of economic security. Nonprofits can survive on what they receive from major donors. But what happens when major donors can no longer cover the gap?

Even worse: if nonprofits do recognize the bursting bubble, most don’t know how to respond. Nonprofit professionals feel the stress of losing individual donors, but they haven’t identified why donors are leaving in droves every year — or how to stop the bleeding. Some nonprofit leaders will argue that people are becoming less generous, but the problem is not a decline in generosity.

In fact, Millennials are more generous than previous generations and, on aggregate, Americans have more to give than ever before.⁴

The fundamental problem is that the fundraising strategies used by most nonprofits were designed for a world that no longer exists. Nonprofits are trying to fit outdated models into a world that has radically changed. And like Antioco, nonprofits are ignoring this shift at the precise moment they should be evolving with it.

Change is constant. Trends, styles, technology, and cultural norms shift every day. Sometimes it happens suddenly, like the first time you were able to FaceTime your friend across the globe or the first time you streamed you favorite pop song on demand.

More often, though, change happens slowly — in ways that are much harder to notice. One night you update your phone’s operating system, and everything seems to be the same. Maybe you notice a new feature or two, but, generally speaking, the update seems unnecessary. However, after five or six of these updates, you realize that your phone now tracks your screen time, knows your habits, monitors your health, and even suggests that you put it down for the day when you’ve scrolled for too long. And, slowly, these seemingly inconsequential changes add up to life-changing shifts. Despite the elongated timeline, the implications are just as significant.

That’s how the disconnect between nonprofits and their individual donors has grown in the last ten years. Slowly, but dramatically. And we can’t keep ignoring it.

THE DOWNSIDE OF A SOCIAL WORLD

It was no coincidence that the decline in donors began